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14. Fendrick wants to buy a new dining room set for \$900.
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He is considering four methods of payment. After looking at his budget as well as his actual expenses for the past few months, he thinks he can save
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\$80 per month towards this purchase. He has four options, described in detail on the table below. Which option is best for him?
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(1) He could use a layaway plan to avoid interest and pay exactly \$80 per month, but he would prefer to avoid the \$50 storage fee, and does not want to wait almost a year to have his dining room set.
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(2) He could use the furniture store's installment plan that has a \$100 downpayment and then charges \$73 per month to pay off a 15% annual interest rate.
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(3) He could use the furniture store's zero down plan that costs nothing for six months and then charges \$180 per month to pay off an 18% annual interest rate..
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(4) He could open a new credit card with a 22% annual rate and pay off exactly the \$80 per month he budgeted.
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1 - LAYAWAY PLAN (\$50 storage fee, no other downpayment, no interest)
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MonthOld BalancePaymentInterest Due OnInterest Rate
Interest Amount
New Balance
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1\$900.00\$80.00\$820.000.00%\$0.00\$820.00
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2\$820.00\$80.00\$740.000.00%\$0.00\$740.00
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3\$740.00\$80.00\$660.000.00%\$0.00\$660.00
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4\$660.00\$80.00\$580.000.00%\$0.00\$580.00
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5\$580.00\$80.00\$500.000.00%\$0.00\$500.00
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6\$500.00\$80.00\$420.000.00%\$0.00\$420.00
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7\$420.00\$80.00\$340.000.00%\$0.00\$340.00
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8\$340.00\$80.00\$260.000.00%\$0.00\$260.00
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9\$260.00\$80.00\$180.000.00%\$0.00\$180.00
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10\$180.00\$80.00\$100.000.00%\$0.00\$100.00
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11\$100.00\$80.00\$20.000.00%\$0.00\$20.00
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12\$20.00\$20.00\$0.000.00%\$0.00\$0.00
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\$900.00Total Paid\$0.00
Total Interest
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\$50.00Storage Fee
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2 - INSTALLMENT PLAN (has \$100 downpayment, find the interest rate with 0.15 divided by 12)
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MonthOld BalancePaymentInterest Due OnInterest Rate
Interest Amount
New Balance
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1\$800.00\$73.00\$727.001.25%\$9.09\$736.09
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2\$736.09\$73.00\$663.091.25%\$8.29\$671.38
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3\$671.38\$73.00\$598.381.25%\$7.48\$605.86
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4\$605.86\$73.00\$532.861.25%\$6.66\$539.52
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5\$539.52\$73.00\$466.521.25%\$5.83\$472.35
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6\$472.35\$73.00\$399.351.25%\$4.99\$404.34
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7\$404.34\$73.00\$331.341.25%\$4.14\$335.48
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8\$335.48\$73.00\$262.481.25%\$3.28\$265.76
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9\$265.76\$73.00\$192.761.25%\$2.41\$195.17
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10\$195.17\$73.00\$122.171.25%\$1.53\$123.70
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11\$123.70\$73.00\$50.701.25%\$0.63\$51.33
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12\$51.33\$51.33\$0.001.25%\$0.00\$0.00
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\$854.33Total Paid\$54.33
Total Interest
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3 - ZERO DOWN PLAN (find the interest rate with 0.18 divided by 12)
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MonthOld BalancePaymentInterest Due OnInterest Rate
Interest Amount
New Balance
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1\$900.00\$0.00\$900.001.50%\$13.50\$913.50
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2\$913.50\$0.00\$913.501.50%\$13.70\$927.20
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3\$927.20\$0.00\$927.201.50%\$13.91\$941.11
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4\$941.11\$0.00\$941.111.50%\$14.12\$955.23
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5\$955.23\$0.00\$955.231.50%\$14.33\$969.56
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6\$969.56\$0.00\$969.561.50%\$14.54\$984.10
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7\$984.10\$180.00\$804.101.50%\$12.06\$816.16
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8\$816.16\$180.00\$636.161.50%\$9.54\$645.70
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9\$645.70\$180.00\$465.701.50%\$6.99\$472.69
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10\$472.69\$180.00\$292.691.50%\$4.39\$297.08
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11\$297.08\$180.00\$117.081.50%\$1.76\$118.83
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12\$118.83\$118.83\$0.001.50%\$0.00\$0.00
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\$1,018.83Total Paid\$118.83
Total Interest
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4 - CREDIT CARD (find the interest rate with 0.22 divided by 12)
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MonthOld BalancePaymentInterest Due OnInterest Rate
Interest Amount
New Balance
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1\$900.00\$80.00\$820.001.83%\$15.03\$835.03
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2\$835.03\$80.00\$755.031.83%\$13.84\$768.88
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3\$768.88\$80.00\$688.881.83%\$12.63\$701.50
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4\$701.50\$80.00\$621.501.83%\$11.39\$632.90
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5\$632.90\$80.00\$552.901.83%\$10.14\$563.04
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6\$563.04\$80.00\$483.041.83%\$8.86\$491.89
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7\$491.89\$80.00\$411.891.83%\$7.55\$419.44
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8\$419.44\$80.00\$339.441.83%\$6.22\$345.67
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9\$345.67\$80.00\$265.671.83%\$4.87\$270.54
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10\$270.54\$80.00\$190.541.83%\$3.49\$194.03
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11\$194.03\$80.00\$114.031.83%\$2.09\$116.12
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12\$116.12\$80.00\$36.121.83%\$0.66\$36.78
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13\$36.78\$36.78\$0.001.83%\$0.00\$0.00
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\$916.78Total Paid\$81.75
Total Interest
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